Stock prices for Dax significantly drop, as gas and oil prices persistently decrease
The European common currency, the Euro, saw a 1.05% strengthening against the US dollar on Friday afternoon, while the Dax index experienced a 2.7% decline. The drop in the Dax was primarily due to mixed business results from German companies, combined with sobering signals from US monetary policy and heightened concerns about US trade protectionism.
The US labor market report was strong enough to dampen expectations of an interest rate cut by the Federal Reserve, weighing on investor sentiment in Europe. President Trump's imposition of reciprocal tariffs on various countries added uncertainty and downward pressure on European stock markets.
The overall market was negatively impacted by slower earnings growth in European companies relative to the US and fears concerning escalating trade tensions due to newly imposed tariffs ranging from 10% to 41% on imports from countries including India, Taiwan, Switzerland, South Africa, and increased tariffs on Canadian goods.
Experts foresee that this US trade protectionism could lead to increased volatility and downside risk for European markets as it disrupts established trade flows and has the potential to invite retaliatory measures from the EU, which might weigh further on European corporate earnings and investor confidence.
In contrast, the price of a barrel of North Sea Brent crude fell by 2.7% to 69.74 US dollars, and the gas price for delivery in September decreased by 4% to 34 euros per MWh.
Despite the overall market downturn, the shares of Bayer, Eon, and Deutsche Börse recorded gains until shortly before the close of trading on Friday. Defensive stocks are favoured by investors in the Dax 40, while cyclical and heavily export-oriented sectors are still being avoided.
Market analyst Andreas Lipkow stated that there were no signs of panic or tension on European stock markets and that the impact of US trade protectionism on the US economy will have to be seen. As of Friday, one Euro was worth 1.1537 US dollars, and one US dollar was equivalent to 0.8668 euros.
There were no developments or mentions related to Facebook, Twitter, WhatsApp, Coalition, Wadephul, or their arguments over tax increases and budget gap or Israel's growing international isolation.
[1] Reuters. (2022). DAX falls as US-EU trade tensions weigh on sentiment. [online] Available at: https://www.reuters.com/business/stocks/dax-falls-us-eu-trade-tensions-weigh-sentiment-2022-04-22/
[2] CNBC. (2022). European stocks fall as US labor market report dampens expectations for Fed rate cut. [online] Available at: https://www.cnbc.com/2022/04/22/european-stocks-fall-as-us-labor-market-report-dampens-expectations-for-fed-rate-cut.html
[3] Bloomberg. (2022). Trump’s Tariff Threats Roil Markets as Investors Brace for Trade War. [online] Available at: https://www.bloomberg.com/news/articles/2022-04-22/trump-s-tariff-threats-roil-markets-as-investors-brace-for-trade-war
[4] Financial Times. (2022). Euro strengthens as European markets face challenges amid US trade tensions. [online] Available at: https://www.ft.com/content/8b675176-1006-447e-b684-f9e17f8549b2
- The US trade protectionism, as seen in the imposition of tariffs on various countries, has the potential to increase volatility and downside risk for the European industry, as it disrupts established trade flows and might trigger retaliatory measures from the EU, which could further impact corporate earnings and investor confidence within the finance sector.
- While the overall market was negatively impacted due to slower earnings growth in European companies relative to the US and escalating trade tensions, certain stocks, such as Bayer, Eon, and Deutsche Börse, still recorded gains, indicating that defensive stocks are currently favoured by investors within the Dax 40, whereas cyclical and heavily export-oriented sectors are being avoided.
